why bonus shares is used to reduce the cost of other shares

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Querist : Anonymous

Querist : Anonymous (Querist)

08 February 2012 why is it that in case of bonus shares we use it to reduce the cost of other shares but suppose we recv an asset for free as per as 12 we record it at nominal value and do not use it in the same way..technically it is diff treatment ..plz explain

Jatin Agrawal

Jatin Agrawal (Expert)

08 February 2012 investments are made in an on-going manner, whereas government grants are received on case to case basis. it won't be fair to reduce the value of other fixed assets for grants which i have received for another asset.

take this example for argument's sake.

say. i am operating commercial business for which there is no governmental grant, and say i have fixed assets of rs. 50 lac employed in such commercial business.

i also initiate a separate line of business of producing wind energy and buy a windmill for 55 lacs for which i get 50 lacs as government grant....so apllying your rationale here will be a bit absurd....my primary commercial business's profits will be disturbed due to such treatment..and so it shouldn't be done...my primary business's assets should be left undisturbed....and only the specific asset in question for which grant has been received should be messed around with. :)

Querist : Anonymous

Querist : Anonymous (Querist)

08 February 2012 thank you sir..so would it be correct to say that since shares are from the same source we may reduce the cost but assets can be for diff purposes so as 12 would be appropriate

Querist : Anonymous

Querist : Anonymous (Querist)

08 February 2012 thank you sir..so would it be correct to say that since shares are from the same source we may reduce the cost but assets can be for diff purposes so as 12 would be appropriate

Jatin Agrawal

Jatin Agrawal (Expert)

13 February 2012 yes....it can be said that way

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